TP Pulse: Most shippers braced for big surcharges if ILA struck

Tuesday, October 23, 2012

The vast proportion of transpacific shippers surveyed last week by American Shipper said they were advised by their carriers that they would be hit with sizable port congestion surcharges if U.S. East and Gulf coast ports were shuttered by a dockworkers' strike in early October.
As it turned out, shippers were given a reprieve when the International Longshoremen's Association and its employers agreed to a three-month extension in contract talks under the eye of a federal mediator. The contract was due to expire Sept. 30 and is now set to expire Dec. 30.
Among 68 shippers surveyed by American Shipper, 94 percent said they were to be hit with surcharges if a strike had occurred. Eighty-one percent of those characterized the surcharge as “significant,” while the other 13 percent said the surcharge was “somewhat high.” Only three shippers said they were not informed about such a surcharge.
A number of lines filed for permission with the Federal Maritime Commission to impose surcharges of around $800 per 20-foot container and $1,000 per 40-foot container.
As far as how shippers have reacted to the extension, nearly 40 percent said they are still not worried about a strike and likely won't make major changes to their supply chains. That’s a change from the previous two Transpacific Pulse surveys conducted in May and July, when 23 percent and 24 percent of shippers, respectively, said they were unconcerned about a Sept. 30 strike.
More than 36 percent of shipper respondents said they plan to ship goods early to account for the extended contract deadline, while 30 percent said they would U.S. West Coast ports. Nine percent said they would use east coast Canadian ports in the event of a strike, as those would not be affected by an ILA strike. ILA dockworkers are employed at ports from Maine to Texas.
Some written responses from shippers about what they will do to plan for a strike include making a determination on shipping via the U.S. West Coast in December, and using air cargo. One respondent suggested cargo volumes will be so light at the end of December that the impact of a strike would be muted.
(It should be noted that this edition of the Transpacific Pulse was sent out two weeks later than normal, to account for the outcome of the first ILA deadline.)
In other findings, 61 percent of shippers said ports are not congested at all during the peak season this year, while 37 called ports moderately congested. Only 2 percent said ports were heavily congested.
There appears to be a great deal of variety in terms how shippers are being affected by rate adjustments. However, 22 percent of shippers said their rates had not changed in the last month. Another 22 percent said their rates had decreased moderately, while 18 percent said they increased moderately. Ten percent of respondents said their rates had increased significantly, and 4 percent said they had gone down significantly.
Meanwhile, 22 percent of shippers said they weren’t affected by increases or decreases as their rates were locked in for the year.
Two-thirds of respondents said transpacific capacity is presently even, with 16 percent calling it tight and 16 percent saying it's soft. - Eric Johnson